Cryptocurrencies, also known as crypto, works under a digital system that uses a digital ledger for transactions and trade. This intangible form of currency has potentially removed the need for institutions that manipulate the economy. Cryptocurrency hence gives the common man the power to make financial transactions without the interference of a regulatory authority.
The idea of cryptocurrencies has taken the world by storm, even Pakistan was reported to have as many crypto activities as some developing countries like India and Vietnam.
The State Bank of Pakistan (SPB) had announced it is doing its own research on how the use of cryptocurrencies can be formalized given the fact that millions of Pakistanis are using cryptocurrencies to trade online, even though SBP officially forbids from doing so.
Pakistan has already failed to bring PayPal to the country despite multiple efforts by different governments, which paved the way for internet entrepreneurs in Pakistan to use cryptocurrencies as a financial tool of the trade.
Upon the directions of the Sindh High Court, the Federal Ministry for IT has now hinted at a complete ban on cryptocurrencies in Pakistan. The State Bank of Pakistan has also directed Federal Investigation Agency (FIA) to conduct raids and make arrests as per their regulations.
How did it all come to this?
In 2014 reality show host social media influencer Waqar Zaka started talking publicly about Bitcoin on his social media platforms and even started his own cryptocurrency called TenUp. It’s listed on some legitimate cryptocurrency exchanges like Okex, Uniswap, and Stex among others. Despite all the efforts to pave the way for cryptocurrencies in Pakistan, the government showed little interest in bringing the disruptive idea under the law.
Waqar Zaka had filed a petition in court to legalize the use of cryptocurrencies in Pakistan. In December 2020, the court ordered the authorities not to arrest people dealing with crypto if they are not involved in illegal activities but now the State Bank of Pakistan has recommended imposing a complete ban on cryptocurrencies in Pakistan.
To tackle the demands of digital currency many governments around the world are experimenting with central bank digital currency and many are banning cryptocurrencies.
Some other countries didn’t ban it completely but hardened their stance on the concept by acting on illegal matters. In Pakistan, the State Bank of Pakistan has strongly recommended a complete ban on crypto’s and other related transactions, a committee was formed under the supervision of the deputy governor of SBP’s along with representatives of the Pakistan Telecommunication Authority (PTA), ministries of information technology, ministry of finance and Federal Investigation Agency (FIA).
The final verdict of the committee was to ban the currencies as it would outpour illegal money and transactions, the committee also sent a report to the ministry of law to review the legal aspect of the verdict.
This statement says that “The SBP has not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such virtual currencies, coins, or tokens in Pakistan. All banks, development financial institutions, microfinance banks and payment system operators, payment service providers are advised to refrain from processing, using, trading, holding, transferring value, promoting, and investing in virtual currencies/tokens. Further, they will not facilitate their customers/account holders to transact in VCs/ICO Tokens. Any transaction in this regard shall immediately be reported to the Financial Monitoring Unit (FMU) as a suspicious transaction”
Federal Investigation Authority (FIA) investigates serious crimes and enforces the law is reported to seek help from the Pakistan Telecommunication Authority (PTA) for blocking all the websites dealing with crypto. according to the Director-General of FIA, this act will prevent money laundering, terror funding, scams, and other related illegal activities.
He also pointed toward China and other countries that banned the crypto adding that a new dimension is given to the frauds using virtual money. In Pakistan, there is no law to prevent the crimes related to cryptocurrency due to which FIA has dealt with major scams of eleven applications linked to Binance (a major crypto exchange). In another fake cryptocurrency scam, over $100 million were lost by Pakistani investors. FIA has also recently arrested a scammer in Faisalabad for defrauding using cryptocurrencies.